In his latest Off the Charts podcast (subscribe here), CME Group Chief Economist Blu Putnam discusses the most recent El Nino’s and La Nina’s, and how they have affected U.S. corn and soybean production. In August 2015, a very strong El Nino sparked an unusually warm climate for the U.S. Midwest, and improved growing conditions in Argentina and Brazil, says Putnam. By December 2016, the weather flipped to La Nina. As La Nina’s go, it was weak, and by February, it was already disappearing, with a new El Nino returning.

“In addition to the warmer waters in the Pacific Ocean along the equator, we are getting cooler waters in the Northern Pacific along Canada and the Northwest coast of the United States. This has nothing to do with El Nino, but it’s happening at the same time. It may be the bigger influence on agricultural production in 2017.”

The result is a low pressure system that results in wet weather along the southern United States, and the jet stream stays in the north so cold Canadian air does not creep into the U.S. Says Putnam:

“The net of all this is we’re looking at a pretty benign weather pattern for the U.S. cornbelt, for Argentine soybeans or for Brazilian corn. That is, we don’t think the weather is going to disrupt production in the coming growing season.”

Politics More Volatile

As Putnam states, there are TWO major influencers of corn and soybean markets. After weather, of course, it’s politics. And as is usually the case with corn and soybeans, you can start in South America. Argentina elected a new President who brought in reforms on tax and regulatory policies, and the net result is easier exports for the country’s farmers. Brazil’s well-known political disruption has ultimately resulted in improving the government and political certainty, which has also led to more exports. The U.S., meanwhile, has taken a step back to global exports, causing some uncertainty among U.S. farmers. In the podcast, Putnam says this could be the biggest factor facing corn and soybean markets.

“It may be that while the weather outlook is benign, the political outlook may cause volatility in ag markets as we look into 2017.”

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